Watch Economic Observatory / Swiss watch exports to hit new high in 2023. Luxury goods boom continues

In 2023, luxury goods consumption was brisk, especially among the world's wealthy. Luxury watches were no exception, with Swiss watch exports last year hitting a new record high for the third consecutive year. However, there are also concerns that interest rate hikes in various countries could slow the global economy. What will happen to luxury watch demand in 2024? Leading economic journalist Tomoyuki Isoyama analyzes and considers this year's outlook based on trends in major countries.

Swiss watch exports to hit new high in 2023 as luxury goods boom continues

　Global exports of Swiss watches, a barometer of luxury watch demand, appear to have reached a new record high in 2023. At the time of writing, the Federation of the Swiss Watch Industry (FH) has not yet released its annual statistics, but the cumulative total from January to November is approaching the previous year's annual export value, and adding December's figures will surely set a new record. Demand for luxury watches and other precious metals and jewelry remains strong due to the booming economy, particularly in the United States, and global consumption, particularly among the wealthy, continues to expand.

　The cumulative export value of Swiss watches from January to November 2023 was 24,595.7 million Swiss francs (approximately 4.1878 trillion yen), an increase of 7.7% compared to the same period last year. This is already almost on par with the annual export value of 24,859.1 million Swiss francs in 2022, and it is expected that 2023 will significantly exceed this figure. Swiss watch exports hit a record high of 21,717.7 million Swiss francs in 2019, but fell sharply by 217% to 16,999.7 million Swiss francs in 2020 due to the freeze on economic activity caused by the spread of COVID-19. However, they recovered rapidly in 2021, reaching a new record high, and in 2022 they also exceeded the previous year. This means that 2023 will be the third consecutive year of record highs.

　The top export destination is the United States. In 2022, an unprecedented consumer boom led to a significant increase in Swiss watch exports, up 26% from the previous year. In 2023, there were concerns about an economic slowdown due to the impact of the Federal Reserve's successive interest rate hikes to curb the booming economy and rising prices, but luxury goods consumption remained strong. The cumulative total through November was up 6.6% compared to the same period last year.

A tailwind for luxury goods consumption

　Luxury goods consumption was booming not only in the United States but around the world. Of the 25 major export destinations for Swiss watches, only three countries - South Korea, Qatar, and Bahrain - saw a decline compared to the previous year. Looking at the demand for luxury watches, the global economy appears to be progressing smoothly. According to a forecast by the International Monetary Fund (IMF) as of October 2023, the global economy, which saw real GDP (gross domestic product) growth of 3.5% in 2022, is expected to grow at around 3.0% in 2023 and 2.9% in 2024. While interest rate hikes in major countries are expected to lead to a gradual slowdown in the global economy, it can also be said that solid real growth of around 3% will continue.

　Prices continue to rise worldwide, but this is likely to continue to be a tailwind for luxury goods consumption. In Europe and the United States, wages are also continuing to rise along with rising prices, so there are no strong concerns that consumption will slow down. In particular, the desire to spend among the wealthy, who spend on expensive items, has not declined. Ordinary people, whose wages have not increased, are finding life difficult due to rising prices and are taking steps to curb their consumption, but the wealthy are actually seeing their incomes increase.

　Furthermore, rising prices have led to a significant increase in asset prices such as stocks and real estate, and the wealthy are experiencing unprecedented growth. Although social issues such as the widening gap between rich and poor are becoming more serious, luxury goods consumption by the wealthy is likely to continue to grow even after 24.

Demand for luxury goods remains solid in the Chinese market

　The biggest concern was the economic slowdown following the collapse of China's bubble, but the economy appears to be showing signs of stability in terms of demand for luxury goods. While problems that are shaking the foundations of the Chinese economy, such as the management crisis at real estate companies, worsening finances of local governments, and rising youth unemployment, have not been resolved, judging by Swiss watch exports, consumption by the wealthy appears to be returning.

　Swiss watch exports to mainland China increased by 7.8% cumulatively through November, outpacing the 6.6% increase to the United States. Exports have not yet reached 2021 levels due to the large drop in 2022, but they are not in a situation where they will continue to fall below bottom. It has been said that the Xi Jinping regime's tightening of restrictions on the wealthy has led to their assets fleeing the country, but it is possible that the government's restrictions are being relaxed somewhat.

　The Hong Kong economy also appears to be recovering. The cumulative value of Swiss watch exports to Hong Kong through November has grown significantly, up 24.0% year-on-year. With the elimination of pro-democracy forces following the implementation of the National Security Law coming to an end, this could be seen as a sign that trade with mainland China is becoming more active again. It seems likely that the favorable economic environment surrounding luxury watches will continue into 2024.